June 10 ASIAN Macro Initial Thoughts Expect caution today
Covid-19 Globally over 7.15m cases, 407k deaths
Harvard study of on-line searches and satellite images suggest China had covid-19 since the fall 2019. China dismisses the claims as ridiculous.
Dow Futures opened flat; +30pts but the initial trend is rising ahead of FOMC decision tonight.
US and European markets overnight saw a move towards defensives ahead of todays FOMC decisions.
DOW -1.1%, NDX +0.3%, S&P -0.8%, Russel 2K -1.9% Markets opened lower on weak data and mixed results but worked higher with the Nasdaq first to break +VE in the first hour and then broke above above 10,000 for the first time.
But all indexes sold down into the close. The trend was into defensive stocks ahead of the FOMC decision and press conference.
Pre market company reporting was mixed; Tiffany +2% reported a quarterly loss missing expectations of a profit but revealed amendments to debt agreements to make it complaint with covenants +VE. Macy’s -7.3% & Signet Jewelers’ -16.2% despite numbers being better than expected along with HD Supply’s +6.6% But Stitch Fix -5.5% missed badly.
Trading saw investors taking some profit from ‘economy re-opening’ names United Airlines -8.3%, Delta Airlines -7.6% Carnival -2.6%, Royal Caribbean -6.9%. Gap -8.6%, Simon Property -9.5% after rallying Monday. Tech continues to work higher Amazon +3% Apple +3.2% to new highs. Facebook +3.1%, Netflix +3.5% and Alphabet +0.3%
Concerns that retail investors are ‘betting' on government support as shares of Hertz -24% (but at one point was flat) JC Penny -32% but the stocks have doubled since the beginning of June. FT quote '“It’s great that Vegas is open again but who needs it when you have the stock market instead?”'
Apple is preparing to announce a shift to its own main processors in Mac computers, replacing chips from Intel Corp -1% as early as this month at its annual developer conference, people familiar with the plans said.
NFIB Business Optimism Index May 94.4 vs 90.9 Apr (F/cast was 85)
Redbook -3.2% MoM vs -1.4% prior ( -9.7% YoY vs 7.2% Prior)
Wholesale Inventories Apr +0.3% MoM vs -1% Mar (F/cast was +0.4%)
JOLTs Job Openings Apr 5.046m vs 6.191m Mar (F/cast was 5.3m)
IBD/TIPP Economic Optimism Jun 47 vs 49.7 May (F/cast was 51)
API Crude Oil Stock Change +8.4m vs -0.5m prior
USD was weaker vs Yen & flat vs Euro. Bitcoin +0.6% @9796.54 ,
VIX +6.8% @ 27.6, US T10 0.824% fell as investors turn cautious.
OIL Brent +0.7%, WTI +2% on supply cut optimism over covid-19 second wave concerns But turned -VE in after market after APR showed a big jump in stocks
Gold +1.2%, Silver -1%, Copper +0.1%
AHEAD MBA 30 yr Mortgage Rate and Mortgage Applications, Core Inflation Rate, Inflation Rate, EIA Petrochem Stocks Change Report, FOMC Meeting & Press Conference
DAX -1.6%, CAC -1.6%, FTSE -2.1% Markets opened weakly and initially sold down on weak European data and the weaker outlook from the latest World Bank report. They then traded sideways for most of the day with a small rally into the close. Banks and travel stocks lead the declines and healthcare was the only sector to be positive intraday. Banks weak as the European Systemic Risk Board, an EU regulator, recommended banks hold off paying dividends to shareholders until January 2021 at the earliest and Soc Gen’s -7.4% business update suggested a more gradual recovery.
DB -4.6% committing more capital to US markets despite a stretched balance sheet says FT article.
Airbus -7.6% and Safran -4.7% as the details of the state aid package were not as good as had previously the thought.
Aveva +4.3% announced cost cutting plans
Other key movers John Wood -9.1%, Hellofresh +5.7%, Subsea 7 -6.3%
GDP Growth Rate Q1 -3.1% YoY vs +1% prior (F/cast was -3.3%) [Q1 -3.6% QoQ vs +0.1% prior (F/cast was -3.8%)]
Employment Change Q1 +0.4% YoY vs +1.1% prior (F/cast was +0.3%) [Q1 -0.2% QoQ vs +0.3% prior (F/cast was -0.2%)]
Balance of Trade Apr Euro3.5b vs 17.4b Mar revised (F/cast was 15.9b)
Imports sa Apr -16.5% MoM vs -5 Mar revised (Consensus was -16%)
Exports sa Apr -24% MoM vs -11.7% Mar revised (Consensus was -15.6%)
Current Account Apr Euro 7.7b vs 25.6b Mar revised (F/cast was 14.9b)
FRANCE Balance of Trade Apr Euro -5b vs -3.2b Mar revised (F/cast was 15.9b)
Current Account Apr Euro -5.4b vs -2.8b Mar revised (F/cast was -2.3b)
EUROZONE Speeches from Schnabel and Guindos
GERMANY No data due
FRANCE Industrial Production
UK No data due
JAPAN Expect Nikkei to open lower following the US sell off with caution ahead of the FOMC press conference. Pre market data will also influence today’s trading. Yen strengthened currently 107.75
Apr Machinery Orders (Mar was -0.7% YoY (-0.4% MoM) F/cast is -16% YoY (-13.2% MoM),
PPI Apr (Mar was -2.3% YoY (-1.5% MoM) F/cast is -2.6% YoY)
S&P Global Ratings lowered its outlook on Japan's sovereign debt rating on Tuesday, to stable from positive, citing increased uncertainty over the country's fiscal health as it boosts spending to overcome the effects of the coronavirus pandemic.
Softbank cut 15% of jobs from vision fund and other staff re-allocated, the cuts come despite the strong rally in Softbank shares which have climbed 99% since the March sell off.
Reuters reports that Japanese currency traders are positioning for the FOMC to announce measures to flatten the treasury yield curve.
BoJ says Japan's money stock, or currency in circulation and bank deposits, +4.1% May vs +3% April, the fastest annual pace on record as companies hoarded cash to guard against slumping sales from the coronavirus pandemic.
Lixil Group Corp (5938.T) said it is selling its stake in household goods retailer Lixil Viva (3564.T) as it continues to streamline its operations following a high-profile boardroom drama last year. +VE
Mira Robotics developed its “ugo” robot to reinforce greying Japan’s shrinking workforce, but as the coronavirus threat persists, the Japanese startup is offering its machine as a tool in the fight against the outbreak, the company’s CEO said. Slight +VE
The government will launch a probe this month into the outsourcing administrative work related to a coronavirus relief package worth Yen 76.9bn that was later subcontracted to Dentsu for 74.9bn, industry minister Hiroshi Kajiyama said. Comes as the Govt is under pressure for SME’s who say it cost more in fees to access govt support than the support the government is offering.
Soaring temperatures rise concerns about heat stroke from wearing masks -VE
Honda hit by cyber attack. No breach of data Slight -VE
SOUTH KOREA Expect markets to open lower following the US sell off. Unemployment data also a -VE plus caution after N Korea cut ties and ahead of the US FOMC press conference tonight.
Data out Unemployment Rate May 4.5% vs +3.8% APR (F/cast was 3.9%)
United Nations human rights expert voiced alarm on Tuesday at "widespread food shortages & malnutrition" in North Korea, made worse by a nearly five-month border closure with China and strict quarantine measures against COVID-19.
Daewoong Pharmaceutical (069620.KS) said its anti-parasitic drug niclosamide had eliminated the novel coronavirus from animals’ lungs during testing. The company plans to start human clinical trials in July. +VE
Hyundai Development Co (294870.KS) said on Tuesday it wants new terms for its acquisition of Asiana Airlines (020560.KS) after the carrier’s already hefty debt burden increased by some $3.8 billion. It also called on Asiana’s state-funded creditors to provide support to the long-troubled airline, which must now also contend with the coronavirus pandemic’s crippling impact on travel demand.
Samsung A South Korean court on Tuesday denied an arrest warrant request for Samsung Group heir Jay Y. Lee after prosecutors accused him of accounting fraud and stock manipulation. Samsung and affiliates reacted positively to the news yesterday
TAIWAN Expect market to slightly higher with rotation back into Tech after the HDX hit new highs. But upside muted after ahead of FOMC decision and press conference
No data due
FSC ends the local short selling ban today as the COVID-19 situation in Taiwan has steadily improved and local equity markets have stabilized,
TSMC left its record capital expenditures plan unchanged for this year as robust client demand for 5-nanometer technology is expected to quickly fill a capacity hole after the US government announced restrictions against supplying Huawei. Capex to expand capacity for advanced 5-nanometer and 7-nanometer tech, and develop 3-nanometer technology. +VE
Asustek Computer yesterday provided a mild outlook for its business in the upcoming quarters, after revenue fell by a double-digit percentage in the first quarter due to the effects of the COVID-19 pandemic. “It has become challenging for us to maintain growth in both revenue and profit in the short term... The PC market is no longer on an upward trend,” Citing heavy market uncertainty fostered by the pandemic, Shih said that Asustek’s revenue might be affected in the second half of this year. Slight +VE
AUO and Innolux are on course to claim 22.9% and 20.6% shares of the global notebook panel market in the first half of the year, TrendForce said +VE
Yageo Corp’s US$1.64 bn acquisition of US capacitor manufacturer Kemet Corp and its subsidiaries was approved. Apart from adding high-end automotive, industrial and 5G component segments to its portfolio, the move would help expand Yageo’s presence across the US and Europe, as well as Japan. The deal is expected to be completed next month +VE
Tong Yang Industry manufactures bumpers and automotive sheet metal, yesterday posted revenue of NT$1.02 billion for last month, -43.72% YoY citing covid-19 lockdown issues
Sun Max Tech posted revenue of NT$107.94 million for last month, +76.9% YoY but -19.63% MoM. The company mainly supplies graphics card cooling kits and other gaming-related products for desktop PCs and laptops. It expects growth momentum to persist for the remainder of the year on new product launches by Intel Corp, Nvidia Corp and Advanced Micro Devices Inc. +VE
CHINA Expect market to open lower with caution ahead of data and following the US sell off
Data due May Inflation Rate Apr was +3.3% YoY (-0.9% MoM). F/cast is +2.7% YoY (-0.4% MoM), PPI May (Apr was -3.1% F/cast is -3.4%).
FT article Chinese businesses adapt to post-lockdown reality, notes business re-opening but a lack of customers, worries regarding second waves says the article but I would imagine job security/income issues too. Cites a restaurant with sales at half pre covid-19 levels meaning its made 50% of its staff redundant and the remaining staff have had a 20% pay cut. Extrapolate that across China and you can see a huge slowdown after the initial rebound on re-opening from zero
China and Russia work together at the UN to oppose the US wholesaled claimed it could trigger a return of sanctions against Iran.
Philippine’s opens new landing ramp and plans US$26m of spending on military infrastructure on Pag-Asa; likely to raise tensions in South China Sea.
BELT and Road Romania abandons plans for a joint nuclear energy project -VE
HONG KONG ADR’s -87pts to open at 24,970 expect more downside with caution ahead of FOMC meeting and concerns about more companies needing bailout packages. Cathay Pac, Swire and AirChina in focus on resumption of trading; expect some weakness. Expect caution ahead of China data on the open and the FOMC press conference tonight. Protesters gather last night to commemorate the march against the extradition bill last year but it was peaceful.
No data due
Short Selling HSI Tuesday 16.9% vs 18.9% Monday
Top Shorts Hang Lung Ppty (101) 36%, Wharf REIC (1997) 35%, Ping An (2318) 33%, Hang Seng Bank (11) 31%, ICBC (1398) 29%, MTRC (66) 25%.
CATHAY PAC (293 HK) Govt support via a HK$39bn deal made up of a bridge loan, preference shares and warrants. Rights issue: 7 for 11 at HK$4.68 each a 47% discount to the previous close. The government to own 6.08% of Cathay. I have been -VE on Cathay Pac for several years and whilst I think this is a good deal for Cathay Pac I would NOT be buying the stock until there is more clarity on when international air travel will start resuming. I would expect a number of short sellers to be locking in some of the recent gains.
AIR CHINA undertakes to Cathay Pac rights issues
Govt says travel bubble is nearly ready to allow travel between HK, Macau and Guangdong and could be reached in the coming weeks +VE Macau Casino's
Inland Revenue Department's Stamp Office announced that 32 residential transactions involved Buyer's Stamp Duty (BSD) in May, down nine cases or nearly 22% monthly, representing a downfall for seven months and logging a record low. The tax amount involved was $162.3 million, almost a double-up from a month ago.
SFC launching a two month consultation to allow more flexible rules for REITs; increasing the proportion invested in development, allowing increased leverage and taking minority stakes.
JD-SW (9618.HK)'s IPO, by 5pm on the second day ten brokers granted over $48 bn of margin for the IPO in aggregate. Indicating the stock was over-subscribed by around 29.6 times in public offering. The IPO will end on 11 June.
HKD touched the Strong-side Convertibility Undertaking again during Hong Kong trading session, the HKMA undertook USD250 million selling orders, equivalent to an injection of HKD1.938 billion into the market. The balance of the banking system was expected to increase to HKD115.749 billion on Thursday (11 June).
SUNNY OPTICAL (2382.HK) said the shipment of handset lens sets -8.6% YoY to 97.478 mn units in May under epidemic impact; that of vehicle lens sets -35% YoY to 2.547 mn units.
CLP HOLDINGS (2.HK)'s wholly-owned subsidiary CLP Innovation Enterprises Limited formed a partnership with CYZone, a leading provider of event and information services supporting the growth of technology innovators in Mainland China, to help scout the most promising smart energy technologies amid growing demand for more digitally-connected and sustainable energy services. CLP and CYZone will identify outstanding Chinese companies with innovative technologies and business models in areas including energy management, e-mobility, smart buildings and storage applications. Selected companies will work on pilot projects for potential deployment by CLP in Mainland China and other markets in Asia Pacific.
HSBC was criticised by US Sec State Pompeo for endorsing China’s move to impose a national security law on HK No impact. FT its running an article HSBC treads geopolitical tightrope in backing Beijing’s security law which looks at the Bank’s decision to pick sides in Hong Kong sparks investor backlash and internal debate
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